Excerpted from IBD, “Job One: Wean The Economy Off Of Politics”, Krauthammer, November 28, 2008
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We have gone from a market economy to a political economy.
In the old days, if you wanted to get rich, you did it the Warren Buffett way: You learned to read income statements and balance sheets. Today you learn to read political tea leaves.
Today’s extreme stock market volatility is largely a reaction to meta-economic events: political decisions that have vast economic effects. You don’t anticipate Intel’s third-quarter earnings; instead, you guess what side of the bed Henry Paulson will wake up on tomorrow.
We may one day go back to a market economy. Meanwhile, the two most important implications of our newly politicized economy are the vastly increased importance of lobbying and the massive market inefficiencies that political directives will introduce.
Lobbying used to be about advantages at the margin — a regulatory break here, a subsidy there. Now lobbying is about life and death.
You used to go to New York for capital. Now Wall Street, broke, is coming to Washington. With unimaginably large sums of money being given out, Washington will be subject to the most intense, most frenzied lobbying in American history.
The other kind of economic distortion will come from the political directives issued by newly empowered politicians.
For example, bank presidents are gravely warned by one senator after another about “hoarding” their bailout money. But hoarding is another word for recapitalizing to shore up your balance sheet to ensure solvency. Isn’t pushing money out the window with too little capital precisely the lending laxity that produced this crisis in the first place?
Even more egregious will be the directives to a nationalized Detroit. Sen. Schumer, the noted automotive engineer, has declared “a business model based on gas” to be completely unacceptable. He says, “We need a business model based on cars of the future: the plug-in hybrid electric car.”
The Chevy Volt, for example? It has huge remaining technological hurdles, gets 40 miles on a charge and will sell for about $40,000, necessitating a $7,500 outright government subsidy. Who but the rich and politically correct will choose that over a $12,000 gas-powered Hyundai?
The new Detroit churning out Schumer-mobiles will make the steel mills of the Soviet Union look the model of efficiency.
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Full article:
http://www.ibdeditorials.com/IBDArticles.aspx?id=312760589983880
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December 3, 2008 at 10:46 am |
So how can politicians hope to have legit campaign finance reform while at the same time inserting themselves into the process of determining winners and losers?